Nvidia’s stock price surge led the way as stocks rally, semiconductors under the spot light

May 26, 2023
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NVIDIA STOCK PRICE IS THE STAR OF THE SHOW

If you are a Nvidia (NVDA) shareholder, congratulations, Thursday was a great day. The Nvidia stock price boomed on the back of earnings. The rally in NVDA’s stock price on Thursday led the indexes higher. OK except for the Dow, and who cares.

Nvidia announced much better than expected earnings, more on this later. The surge in Nvidia stock price has the company’s total market cap closing in on $1 trillion. Of course, the stock markets rallied on the news and why not. The Nvidia stock price placed semiconductors under the spotlight.

This leads to two key questions:

With the increasing use of AI by everyone are we at the start of a semiconductor super cycle?

Across the board, in particular in tech, what earnings surprises do companies have coming?

First off, the Stock indexes Thursday rallied with the Nasdaq 100 sharply up to a 13-month high. The +24% surge in the Nvidia stock price led technology stocks higher. NVDA’s management announced better-than-expected Q1 revenue and forecast stronger-than-expected Q2 revenue.

Finally, something positive pushed the continuing U.S. debt ceiling debate or saga off the headlines. A resolution remains elusive with some saying there are still a couple of issues out there. Look, a resolution will come, the consequences would be a disaster.

Anyway, hopefully they are getting close to a deal and it is down to details now.

The U.S. economy remains strong despite the current hawkish monetary policy by the FED. Thursday’s U.S. Q1 GDP, and initial unemployment claims, were stronger than expected. U.S. Q1 GDP was revised upward to +1.3% (q/q annualized) from +1.1% as Q1.

The driver of this was personal consumption, indicating the consumer remains strong. The Q1 figure was revised upward to 3.8% from 3.7%. The markets are betting on a 50 / 50 chance of a 25 bp rate hike at the June 13-14 FOMC meeting.

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NVIDIA (NVDA): EARNINGS UPSIDE

Nvidia posted earnings that were way better-than-expected for Q1 2023. Let’s take a look first the sales forecast for the future was above expectations. As demand for Nvidia’s AI and data center semiconductors is in their words “surging.”

Management said that its adjusted earnings for the three months ending in April, NVDA’s first fiscal quarter, came in at $1.09 per share. OK, a 19.9% fall compared YOY. But the earnings report way exceeded Wall Street’s consensus estimate, of 92 cents per share.

Across the group sales fell 13.3% from last year to $7.19 billion, but that number was higher than what analysts had predicted, which was $6.52 billion. Leading the way was data centers, Nvidia said that the amount of money made by data centers was a record $4.28 billion.

This is a 14% increase from last year. Gaming chips, used to mine cryptocurrency, brought in fell 38% at $2.24 billion. Looking ahead to Q2, the top line for Nvidia is expected to be around $11 billion. This is a lot more than what Wall Street is expecting, which is $7.15 billion.

Driving this is a major change in the computer industry. Two major changes are occurring concurrently, faster computing and generative AI.

There could be up to a trillion dollars invested in global data center infrastructure. This switches general-purpose to accelerated computing. Driving this are companies seeking to use generative AI in every product, service, and business process.

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Nvidia’s stock price surge led the way as stocks rally, semiconductors under the spot light